Overture Buys Rival Carrier Ethernet Gear Maker Ceterus


What is rarer than common sense and logic in Washington, D.C.? No, not a homegrown New York Yankee. I’m talking about M&A announcements involving telecom equipment makers. Overture Networks, a carrier Ethernet equipment maker based in Research Triangle, N.C. has acquired Richardson, Texas-based Ceterus Networks, whose technology enables Ethernet services over copper, for an undisclosed amount of money.

Ceterus was founded in 2001 and raised a lot of money from investors including Sevin Rosen Funds, comVentures, Intel Capital and Aldus. They raised $20 million in May 2007, so I’m guessing they must be running low on cash — hence the deal. Overture, by way of comparison, has raised more than $26 million from Lehman Brothers Venture Partners, Morgenthaler Ventures and others.

The combined companies are rumored to have revenues of around $45 million, according to Light Reading, which also reports that it would have 180 customers worldwide, among them TW Telecom (s TWTC), Cable & Wireless (S CWP) and COLT Telecom (s COLT). I asked Overture how many customers Ceterus will bring to the table, but all they’d say was that with this deal Overture will now have a bigger set of offerings for its customers.

Overture’s reason for the deal: big demand for Ethernet equipment for cellular backhaul networks. As I’ve said before, wireless carriers are seeing a big demand for bandwidth thanks to the rollout of their 3G networks and growing popularity of devices such as Apple’s (s aapl) iPhone. Infonetics Research predicts that demand for wireless backhaul gear will hit about $10 billion by 2011.


Itinerant Networker

I’m still a little challenged to understand if Carrier Ethernet is really the golden solution for mobile backhaul, given how much some of the equipment vendors (and carriers themselves) talk about deploying rich services as far out at the edge of the network as possible. The further out things go, the more you need QoS, and suddenly a connection model doesn’t seem as realistic.

Rob Adler

Actually, the plain ol’ Carrier Ethernet business is a rare bright spot in the Telecom world – even without considering mobile backhaul. Accroding to Heavy Reading, the Ethernet over TDM market is set to grow in value from around $78 million in 2007 to more than $270 milion in 2011. I am not sure that the market will meet the HR forecast in this economic environment, but still it will be quite good in comparison to rest of the industry.

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